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Dive Brief:

The Hawaii Public Utilities Commission (PUC) on Wednesday launched the second phase of its investigation into performance-based ratemaking (PBR), aimed at overhauling how the state's investor-owned utility is regulated at a time of grid transformation.

The PUC concluded the first phase of the inquiry in May, when it adopted a portfolio of performance-based tools for Hawaiian Electric utilities and said it anticipates issuing an order on Phase 2 issues in December 2020.

Regulators say the second phase will focus on the development of Revenue Adjustment Mechanisms and Performance Mechanisms to help determine appropriate utility revenues during multi-year rate plan periods.

Dive Insight:

Having sketched out revenue adjustment and performance mechanisms earlier this year, Hawaiian regulators intend to pick up where Phase 1 ended.

"Upon conclusion of the working group meetings, there will be a formal briefing period, during which the Parties' comprehensive proposals will be further refined by briefing, information requests, and an evidentiary hearing, which is expected to last through October 2020," regulators said.

The Hawaii legislature launched the process of developing performance-based rates in 2017, looking to address the state's electricity costs while pushing to meet a 100% renewable energy goal by 2045. Hawaii has the highest electricity rates in the nation.

The commission has adopted certain principles to guide the PBR frameworks. Among them is a "customer-centric approach."

PBR frameworks "should encourage the expanding opportunities for customer choice and participation in all appropriate aspects of utility system functions, including verifiable 'day-one' savings for customers," the commission said.

Regulators also acknowledged, however, that the financial integrity of the utility is "essential" to its basic obligation to provide safe and reliable electric service.

Performance-based regulation "is intended to preserve the utility's opportunity to earn fair return on its business and investments, while maintaining attractive utility features, such as access to low-cost capital," according to the June 26 order.

Working group meetings are expected to take place from August through May 2020, according to the PUC. Initial comments are due Aug. 14, including proposals for a comprehensive PBR framework.